Barrick Gold Doubles Free Cash Flows, But Mali And Pakistan Risks Cap The Upside

Barrick Gold Corporation has recently reported substantial positive changes in its financials, including the doubling of adjusted free cash flow compared to the previous year. This marks a significant improvement, giving Barrick its highest adjusted earnings per share (EPS) since 2013. Investors are paying keen attention as the value of gold has surged, exceeding $3,000 per ounce, creating a ripe environment for mining companies.

Free Cash Flow Increase

The company’s ability to double its free cash flow is indicative of operational efficiency and strong commodity prices. This growth could lead to increased returns for shareholders, as free cash flow allows for dividends and reinvestment into the business.

Reko Diq Project Potential

One of the standout prospects for Barrick is the Reko Diq copper-gold project located in Pakistan. This long-term project has the potential to generate an impressive $74 billion in free cash flow over its estimated lifespan of 36 years. However, uncertainties lie ahead, particularly regarding Pakistan’s capability to fund its share of the project costs.

Geopolitical Risks

In addition to potential gains from their projects, Barrick faces significant geopolitical risks that could affect performance. For instance, operations in Mali have led to complications, resulting in $245 million in Barrick's gold exports being frozen. The company is currently managing temporary care at its Loulo-Gounkoto site, and should it require full care, this could incur costs of up to $10 million per month.

Outlook and Recommendations

Considering these factors, it is expected that Barrick will maintain stable dividends and engage in share repurchase activities. Nonetheless, without a resolution to key geopolitical issues, particularly in Mali and Pakistan, the current risk/reward scenario does not favor a buy rating at this time. Investors should exercise caution and monitor geopolitical developments closely.

Barrick, Gold, Cashflow